Correlation Between Eastern Technical and Megachem Public
Can any of the company-specific risk be diversified away by investing in both Eastern Technical and Megachem Public at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Eastern Technical and Megachem Public into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Technical Engineering and Megachem Public, you can compare the effects of market volatilities on Eastern Technical and Megachem Public and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Eastern Technical with a short position of Megachem Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Technical and Megachem Public.
Diversification Opportunities for Eastern Technical and Megachem Public
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Eastern and Megachem is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Technical Engineering and Megachem Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Megachem Public and Eastern Technical is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Eastern Technical Engineering are associated (or correlated) with Megachem Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Megachem Public has no effect on the direction of Eastern Technical i.e., Eastern Technical and Megachem Public go up and down completely randomly.
Pair Corralation between Eastern Technical and Megachem Public
Assuming the 90 days trading horizon Eastern Technical Engineering is expected to generate 1.0 times more return on investment than Megachem Public. However, Eastern Technical is 1.0 times more volatile than Megachem Public. It trades about 0.05 of its potential returns per unit of risk. Megachem Public is currently generating about 0.05 per unit of risk. If you would invest 85.00 in Eastern Technical Engineering on August 28, 2024 and sell it today you would earn a total of 9.00 from holding Eastern Technical Engineering or generate 10.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Technical Engineering vs. Megachem Public
Performance |
| Timeline |
| Eastern Technical |
| Megachem Public |
Eastern Technical and Megachem Public Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern Technical and Megachem Public
The main advantage of trading using opposite Eastern Technical and Megachem Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Technical position performs unexpectedly, Megachem Public can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Megachem Public will offset losses from the drop in Megachem Public's long position.| Eastern Technical vs. G Capital Public | Eastern Technical vs. Harn Engineering Solutions | Eastern Technical vs. Fortune Parts Industry | Eastern Technical vs. Hydrotek Public |
| Megachem Public vs. NCL International Logistics | Megachem Public vs. The Erawan Group | Megachem Public vs. Airports of Thailand | Megachem Public vs. Eastern Technical Engineering |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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